tv Wall Street Week FOX Business January 7, 2017 12:30am-1:01am EST
>> from "fox business" headquarters in new york city the new "wall street week." charles: welcome to "wall street week" the show with long's -- wall street investing. spanish the last chapter in the present of him as the big story on wall street this week. economy adding 156,000 jobs while the unemployment rate ticked up to 4.7%. >> when president obama took office the unemployment rate was 7.8% of course i was at the height of the great recession but in less than two weeks donald trump will be sworn in as the 45th president united states and that's when companies
come to the economy and the labor markets are gearing up for today's guest u.s. division president and ceo ben thompson and david albrycht asset manager and ceo. i'm so glad you guys are here because i have said and melissa gephardt may say on tv for 25 years the bond market is much smarter than the stock arcade so guys what is the bond market, what is the bond market telling us about the economy the labor market and what's going to be, what the outlook is for the next year? >> the bond market says the jury is out. december was better. we have had the numbers today, doesn't give us any new information. inside causing queasiness in the bond market but frankly the bond market reflects the fact that we have had a relatively weak economy and there's a change in expectations around regulations
and around as this friendliness but the bond market hasn't broken out of its range. we have been at a range of 1.5 to 3% for the last five years and we touch 137 that after brexit. here in the 242 to 60 range this is not a high ten-year bond rates of the bond barkers thing we really don't know anything at this point in the jury is out. >> i would echo ben's comments but one thing i would further like to comment on his wage growth and something else we looked at is wage tracker which is at 2.9%. that's a concern for us and itss far as the overall bond market the ten-year treasury we are looking at somewhere around 2.75 in the range that we have a broken out of the range. comfortable with that but i think in december the curve was
telling us if they got a little too far fast. it was traced all the way back to 235 so it's a leading indicator may be a little too much positive. melissa: from my point of view there has been smack talk on all sides but you'll get inside the administration steve mnuchin talking about three or 4% revenue people like larry kudlow talking four and 5%, steve moore. the flip side on wall street was saying watch out for donald trump we are going to see the economy crashing his going to start a trade war. now it's time to put your money on the table and make your bet. >> with that interesting variables. we have got headwinds from the strong dollar so we have a ridiculously strong dollar. we do have a positive consumer sentiment. we also have the potential for massive fiscal stimulus and
infrastructure spending. all this could be a boost that we have a slow picture which we haven't had necessarily in past environments. to pull away from that for 5% by itself and the strong dollar. it's not a bad picture. gary: is the fed behind come is the fed just right or ahead? >> two things i look at it said the fund futures. gary: we should should explain to viewers that a year ago the fed funds model was saying it was 24 and ultimately have one. >> a lot of things are priced to perfection. the dollar is priced to perfection presents february be dollar is up 10%.
we like the dollar and we like to dollar assets that we had sure bets come into february. we did some of the large commodity currencies in brazil, russia and hedge that debt. those currencies are 13 to 22%. as far as that goes behind the curve i think they are in the right place at the right time. i think dependency is one thing but they're also going to look at markets and they have done that last year where they pulled back from the numbers it came out and said the markets aren't reacting positively. we have to take a deep rest of the way. melissa -- melissa: what do you think? >> i think what's really interesting is the two weeks after the election basic lee did with the fed could do in for five years. melissa: isn't that interesting? >> it breaks even. the week following the election was dramatic by historical measures that gave us a clear path to keep raising rates.
melissa: there's an argument that the government can't control the economy they -- the way they like to produce on the weeks after the election that the government couldn't do and in all that time, what the fed can do. what do you think? >> emergency levels for longtime mccain leading massive assets. if you look at the banks they accumulated assets with no exit strategy. there is no strategy to get out so to me there was a lot of uncertainty in the market. melissa: you guys are so smart. gary: we are going to talk about how we make money in the bob barker because a lot of people say you can't make money in the bond market and these guys will cause how you can after the break. stay right there, "wall street week" we'll be right back.
gary: is the bond market out first? melissa. melissa: one harvard ph.d. candidate says will be the worst record. polish melting saying quote looking back over eight centuries of data. i found they 2016 bull market was one of the largest recorded. history suggests this reversal will be driven by inflation fundamentals and leave investors were soft than the 1994 bond massacre. gary: we are back with ben thompson and david albrycht. dave is it going to be a bond
massacre? >> at salina. the bond bubble taking with it some are so high-yield of 17.1% last year leveraged loans up 10.1 investment corporate up 6.1 emerging markets of 9.8, great returns. that doesn't end. inflation does not kill the bond sector. certain sectors will act positively even when rates go up. we have 17 rate increases in 04 through a six high-yield than that. meche returned 25%. leveraged finance works and in a rising rate environment. you have to look at leveraged finance into buckets but everybody loves bank loans now. we saw obviously be pierced the 1% in the three month libor which means for the first time since 09 with a rising in the fed funds rate you will -- that's why we have seen 27 weeks lows into the will market and there's no reversal of the bonds. the look at two sectors leveraged loans in the month of
december that 3.5 billion positive flow high-yield of 6.5 billion and positive flow so money is going into bonds. gary: i want to talk about venus pulled bonds. came on air with me and there was a huge municipal bond call, you remember, "60 minutes" the end of the municipal bond and you came on tv the next day and made a monster call on the municipal bond market. what is the municipal bond arcade which many viewers have been desperate to. this rising inflation possibility and growing economy how to invest in bonds? >> first following him at dave said about the sector can perform very well, for the last six months municipals and treasuries have performed poorly because they have the lowest credit risks and the lowest yields to start with not necessary benefiting from economy but rising rates so muni has seen significant outflow.
in the last eight weeks of the year there were 20 billion outflows so if 55 come and 20 go back out in a short period of time it made the municipal bond market very cheap so if you look at the bond yield and relative to the treasury guilt they are over 90% for the yields want to buy so i think taxpayer that's that's -- interestingly the biggest supply year since 86 this past year so tremendous bond issuing. questions about the future the big one. if the structure questions is an enormous one. chavez talked about a trillion dollars in infrastructure spending generated by the federal. it will be interesting as we watch infrastructure spending implant developer today in the market you can get it portfolio of leveraged bonds and generate a high-yield at attractive rates today. i agree with david the outlook
for overall rates is not necessarily as pessimistic as the harvard club would indicate. melissa: l. and i and new jersey, they were number one and number two in terms of unfunded liabilities. that has to be worrisome. >> pennsylvania new jersey connecticut and you also have the oil belt states which is a large budgetary shortfall oklahoman we see in alaska and north dakota. you have what's going on chicago right now much weaker parent than detroit a much worse shape than illinois versus michigan. as a taxil von ivester i agree with them outflows and also tax reform have really hit the muni market is a total return player. i'm saying if i'm going to get rid of my treasures treasuries tips have been. why not go into the municipal bonds and pick up a total return of spreads come back and get back to normal. >> you guys to donate good job
as explaining you can still make money in the fixed income market but you have to be mathematic. give me a sense of what your expat patients are firemen investor in the asset class would you get in terms of total regulatory in the next three to five years? >> with trump coming into office we have hope. hope is the implements all of his policies to perfection and tax reform regulation reform fiscal spending increases and risk assets do well. we saw high-yield leverage do well. gary: what type of return can i expect? >> in the leveraged finance are probably going to get if you want to torture and high-yield to get a coupon which is at 6.25 and 100 basis points is a good return. leveraged loans coupon clipping because most of them trade at par so that's a 5.10 and then investment coupons are 3.5%.
gary: i'm glad they got that question. i would say we are in the municipal bond position now and it creates better coupon opportunities that we make the case that rates aren't necessarily going to break out of the range this year. there are a lot of things that bring inflation to the market. >> i was so happy we were able to grow this whole notion. melissa: unless we are wrong. >> you could see rates fall. if things don't come together the way expectations i framed them. this is good for the domestic market in u.s.. the technical demand fixed income in the u.s. is
sensational right now. melissa: a great point. absolutely. i thanks to ben thompson and david albrycht. wall street week we'll be right back. >> we have two simple rules when it comes to rebuilding this country, by american and higher american people more companies fall in line and keep jobs in erica winter and takes over the white house? are "fox business" all-stars break it all down when "wall street week" returns.
the rhetoric. melissa: just this week for canceling plans for a $1.6 billion plant in mexico is going to invest $700 billion into michigan factory instead. a president-elect also ripping into gm and toyota for building auto south of the border threatening a large border tax to trump never even mentioned black & decker but preemptively it announced its moving more jobs inside the u.s.. gary: to our "fox business" all-stars charlie gaster reno and charles gastonia. reporter donald trump's threats on the top mind boardrooms and investors. is it? the board people have said they have actually had more directors meetings? >> there's always externalities that tankers talk about and they talk about currency flows and they talk about what is going on with regulation. now from what i understand they are talking about trump and talking about if there is an
offloading of jobs overseas how is going to react and they are planning for that. you will see that with. donald trump said during the campaign he hated it because of "cnn" and time warner. he knows what they are going to propose and purpose of jobs and keeping jobs here and building the workforce. it's kind of a good thing. the old days and part of me says as a caplis says i want government dictating to industry. that's called fascism by the way but remember the old days pre-trump they would try to figure out how to offload jobs overseas. how do we save money for jobs overseas? now what they're saying is how do we stay out of the crosshairs? i don't think that's necessarily a bad thing. obviously depends on how far he takes it. melissa: what you think about that because when companies talk about keeping jobs here at has to make economic sense to them but that's something the trump
understands that when they come to him and say look you got to make regulation mitre niechta make energy cheap. you have to make it makes sense he does understand those economics do you think? >> he understands the economics. companies understand that this is a pr campaign. donald trump on twitter said pr campaign. he's not even in office yet. melissa: e. tweets once a day. you brought up black & decker but what they have done they have 20 plants a nation right now and they are adding the 29th buying craftsman from sears. there are divine craftsman so they will open up omar plant but they use that trying to get ahead of donald trump and i think a lot of ceos say how can we get ahead of donald trump let's announce this now before we get caught in the crosshairs and become the next target on twitter.
gary: you make a great point especially in the pr aspect. here's where it gets problematic. are the jobs in catchier because of trump are the companies just using this we are going to keep some jobs here and though they were going to do it anyway to get pr. such a journalist to figure out. melissa: why does it matter though? >> why should they get patted on the back? melissa: they are setting an example for other companies. >> a lot of these deals for example they have a sony came into donald trump is that we are going to invest all this money in all this stuff into the u.s. but guess what, that was announced in october. he used the trump event. melissa: whether jobs are coming back come either way there are jobs here. >> your take on the fact that it's for maybe than five goldman sachs current employees were
leaving the firm are joining the administration. gary: listen it takes a lot of swamp dwellers to drain the swamp according to donald trump. listen this is the reality from the truth part. why haven't the trump backers and mark said about this? >> taxis were not politicians. >> goldman sachs wasn't the firm that straddled the washington wall street -- they have no washington presents, right? les there are wall street firm. they're not politicians. i didn't know he was joining.
>> you know dari when? melissa: how are they in the washington swamp? they work on wall street. >> you know yet to do, there's a site called google. it's very easy. >> i want to answer your earlier question. why consumer confidence? is because of the overall reaching promises of donald trump to lower the corporate tax rate, the average person understand the average american is getting surveyed by the conference board come sees that and they think this guy is going to come and help me. that is data that may be different in six months when reality starts to set in up to an operation but again back to the corporations they are trying to get ahead of this because they know like apple, what is apple going to do? they are going to after tim cook again. gary: charlie and shirl thanks for joining us.
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